A reverse mortgage is a loan on a home you already own in New Westminster. You have to be 55 or older for the reverse mortgages offered in Canada. You still own the home. You do not make a normal principal-and-interest payment each month. Interest is added to the balance. The loan is repaid when you sell or when you move, under the terms of that contract. The New Westminster page is the city page. The reverse mortgage page and the reverse mortgage article are the longer pages on the same product.
The money is a loan. It is not wages and it is not a grant. The balance grows. If you take the money and you stay in the home for many years, the amount owed can be much larger than the amount you received. That is the trade. You are spending equity now and leaving less for a later sale or for an estate.
What sets the amount
The amount is based on your age, the value of the home, and any mortgage already on the title. A couple is underwritten on the younger person. A higher age can mean a larger share of the value. The lender, not you, sets the share. Do not budget a number you found in an ad until this home has been looked at.
If there is already a mortgage, the reverse mortgage pays that mortgage first. You do not get the full advance and keep the old payment. The old lender is paid out. What is left, after fees, is what you can use. If the current mortgage is large, there may be little or nothing left to take as cash. Get the payout figure from the current lender before you apply.
Interest, fees, and the house
Interest is added to the loan. You should ask for the rate and for an example of the balance after five years and after ten years, using that rate. The example is a picture, not a promise that the rate never changes. If the rate is variable, the picture should show that. Fees come off the advance as well. Ask for the setup fee and the closing costs in dollars, not as a percentage you have to translate yourself.
You still pay the property tax, the insurance, and the strata fee if the home is a strata. A reverse mortgage does not take those over. If you stop paying the tax, you are in default on the reverse mortgage even though you are not making a mortgage payment. The home also has to stay in reasonable condition. A lender can inspect. This is still their security.
Selling, moving, and the estate
Read what happens if you sell in three years. Some contracts let you repay when you sell. The cost of that early end should be in the same conversation as the cash you want now. Read what happens if one spouse dies and the other stays. Read what happens if you move into care and the home is empty. Those clauses are the product. The cash advance is the easy part to understand.
A normal refinance is a different tool. You make a payment, and you can be younger than 55. The refinance page is that path. If you can carry a payment and you want to keep the balance from growing, a refinance can fit better. If the point of the loan is that you cannot carry a new payment, a reverse mortgage is the product that matches that fact. Pick the one that matches the payment you can actually make.
Proof of age for each owner.
The current mortgage statement and a payout figure.
The tax notice, the insurance, and the strata fee if there is one.
A note on whether you plan to stay, sell, or move in the next few years.
The names on the title. Everyone on title has to be part of the file.
Legal advice before you sign
You will be asked to review the contract with your own lawyer before you sign. That meeting is not a formality. Bring the questions about selling, about a spouse, and about the balance in ten years. Do not sign at the kitchen table and "ask the lawyer later." The lawyer is the point where you can still stop.
You can test an ordinary payment on the mortgage calculator if you are comparing a reverse mortgage with a refinance. A reverse mortgage does not have that same monthly payment, so the calculator will not describe it. Chad Watts is a mortgage broker with TMG The Mortgage Group. One application goes to more than 50 lenders. On a bank file the lender pays the broker fee. On a reverse mortgage, ask which fees you pay. His BCFSA licence number is 142612. Send the statement through the contact page or the application. The about page and the questions page are the background.
Sit with the balance, not only the cheque
Ask the lender for the advance you would receive after the current mortgage is paid out and after fees. That is the cheque. Then ask for the balance at the end of the period you expect to stay. Those are different numbers, and the second one is the one your estate or your sale has to cover. If you plan to stay ten years, do not make the decision on a five-year picture.
Talk to the other owners before the application, not after the approval. If a child is on title, or a spouse is on title and does not want the loan, the file stops. If you want a child to inherit the home with little or no mortgage, a reverse mortgage works against that wish. This is a family decision as much as a lending decision. The paperwork will not sort that out for you.
Keep paying the tax and the insurance without a reminder. Those bills are how you stay in good standing. A missed tax bill is a problem on this product even though no mortgage payment came out of your account that month.
Questions on a New Westminster reverse mortgage
Do I give up ownership?
No. You remain the owner. The lender has a mortgage on the title. You sell when you are ready, subject to the contract, and the loan is paid from the sale.
Can I get the money if I already have a mortgage?
Only if the reverse mortgage is large enough to pay out that mortgage and the fees, with something left over if you need cash. If the current mortgage uses most of the available amount, there may be no cheque.
Is the interest added every month?
Yes. That is why the balance grows while you live there. Ask for a written example at the rate you are being offered, for the number of years you actually expect to stay.
What if I want a normal payment instead?
Then look at a refinance, not a reverse mortgage. You will need to qualify for the payment. The age rule is different. Say which payment you can carry and the file can be aimed at the right product.
